My 31st birthday is coming up this weekend. Even though last year was the big 3-0, I think it took me about a year to come to terms with leaving my 20s and really consider all that I had learned during that decade of my life. Like most people, I experienced mountains of change: I started out my 20s in college, a single woman living with three roommates and a vague notion of what I’d like to do with my life. I began my 30s in my own home, a married woman with a clear sense of what I love to do: help people improve their relationship with money.
Here are some of the biggest financial lessons I learned during my 20s:
1. Don’t borrow from your emergency fund — fix your cash flow problem. This was probably my worst financial habit of my 20s. Early on, when money was tight, I created such a strict budget for myself that I couldn’t help but borrow from my emergency fund for every small setback. I got into the habit of dipping in for non-emergencies, and since the money was mine anyway, I didn’t get into the habit of paying myself back.
Tip: If you find yourself in this situation, take some time to review your budget. It’s important that you give yourself some breathing room. There will always be surprise expenses — a higher than normal heating bill, an extra dinner out with friends, holiday shopping. Don’t let these expenses put you over the edge. Budget for what you can, but give yourself wiggle room for the unexpected, too.
2. A budget is your friend, not your enemy. I went to graduate school right after college. This was the first time I had to pay many of my bills out of my own pocket and it was quite a wakeup call. I started working with a financial coach and one of my first assignments was to create a budget. It made a huge difference for me! I didn’t have to question how I was going to cover all of my expenses. As long as I followed my budget, everything got paid on time.
Tip: Struggling to stick to your budget? Try the envelope method. I used a modified version of this when I was in graduate school: I took a certain amount of cash out of my bank account every weekend and that was my discretionary spending money. I could only use my debit card for a budgeted purchase.
3. Put your money where your mouth is. Like so many things in life, using money well is a whole lot easier said than done. It’s take hard work to connect your money with your values. I believed in giving first, but I didn’t always do it. I wanted to save for my future, but I struggled to commit to a strategy that I could maintain.
Tip: Create a system that works for you and automate it. For me, putting my retirement and emergency fund contributions on auto pay has been a lifesaver. Need help committing to giving? Use bill pay through your bank account — it doesn’t stick a non-profit with fees and it gives you the flexibility to change your contribution at any time.
4. Start small and grow. I’d heard this advice for a long-time but I don’t think I really believed it until I saw it play out in my own life. I have watched my emergency fund slowly grow from a few dollars in a savings account to thousands today. I’ve seen the same thing with my retirement account.
Tip: Start small. I started with setting aside $25/month for emergencies and 3% of my paycheck for retirement. Over time, I’ve slowly grown my contributions to $200/month for emergencies and 5% of my paycheck for retirement (on top of my employer’s 10% contribution). I plan to continue to grow these contributions until I reach my goal amounts.
5. You don’t have to have a credit card to be an adult. I’m a very debt-averse person, and after coming out of college with tens of thousands of dollars in student loan debt I didn’t want to rack up any more. I waited to get my first credit card until I’d been working full-time for two years and had a steady income. Don’t fall into the trap of thinking you need one to improve your credit – or to prove that you’re part of the real world.
Tip: Curious about whether or not you should get (another) credit card? Check out this post.
6. You can do a wedding on a budget, but it takes discipline. During the 18 months my husband and I were engaged, we worked hard to find ways to make our wedding day our own and use our creativity to save money. Between support from our parents and our own savings, we were able to stick to our budget, but it certainly wasn’t easy.
Tip: Sticking to a wedding budget can be a challenge, especially if you add in the expectations from family and friends as well was the temptations from the wedding industry. Take the time to decide where you want to spend and where you want to splurge as a couple. If a family member has a specific expectation for your wedding that they can’t let go of, invite them to invest their time and money in handling that part of your wedding.
7. You don’t have to walk alone when it comes to your student loan debt. Student loan repayment was the financial refrain of my 20s — the process seemed endless and sometimes still does. While I initially started out barreling ahead into repayment on my own, I found that there are a lot of programs available to help. It’s important to examine your options to make sure you’re repaying in the smartest way possible.
Tip: Want to examine your options? Start with studentloans.gov and your lender to see what programs might be available to you. Looking for help in understanding your options and developing an action plan? Seek help from LSS Financial Counseling. Their counseling is free, confidential, and available in-person, by phone, or via Skype.
8. Spending isn’t the enemy of saving. As a student living on a very tight budget, my life was frugal but happy. I learned to be very good at saying “no” to spending on anything that wasn’t necessary. Yet when I got my first job and had more disposable income, that habit didn’t change. I struggled to treat myself, even though I had the means to do so. Over time, I learned that living frugally doesn’t mean you can’t enjoy yourself once in a while. In fact, spending well is part of living a balanced life.
Tip: If you struggle to spend — like I did — keep some money in your budget for fun, even if it’s just a small amount, and make yourself spend it each month. Focus on spending in ways that align with your values, like eating sustainably-sourced food, shopping at local, small businesses, travel, or self-care. Connecting your money and you values is one of the best ways to ensure you are sharing, saving, and spending with intention.
9. Get on the same page with your spouse about money. Over the first four years of our marriage, my husband and I have worked hard to figure out our finances, respect our differences, and create a shared vision of a fulfilling life that we can execute together. It hasn’t always been easy but it’s been worth it.
Tip: Looking for more financial alignment in your relationship? I’d love to help! I’m offering Marriage + Money coaching sessions. Through a survey and 1.5 hour conversation, I’ll help you learn more about one another and your life with money, find ways to better work together as a financial team, and make a plan for next steps.
10. There’s no one right way to use your money. As I look back at how I changed/grew during my 20s, this is the most impactful thing I’ve realized. So many people assume that money is the same as arithmetic — there’s just one right answer. That’s just not the case. Money is personal. The way you use your money should reflect you: your personality, your values, and your vision of a fulfilling life. Just because you use money differently from your neighbor does not mean either of you are doing it wrong as long as you are using your money with intention. Yes, there certainly are smarter ways to handle money, but once you get past the basics there isn’t a lot that’s strictly right or wrong.
Tip: Don’t get so caught up in what others are doing that you forget to forge your own path. I encourage you to see your use of money as a creative endeavor. As you share, save, and spend your money you are crafting a life for yourself and your family, and that’s going to look different for everyone. Don’t be trapped in the comparison game.
What’s been your biggest learning about money so far? I’d love to hear from you! Leave a comment below.